Analyst upgrades:

• Calyon upgraded major network carriers based on falling oil prices and capacity cuts. The analyst is positive over the next 12 months but cautious short-term given the uncertain economy, and volatile markets and oil prices. AMR Corp (NYSE: AMR) and Delta Air (NYSE: DAL) were upgraded to Add from Neutral and UAL Corp (NASDAQ: UAUA) was raised to Neutral from Reduce.
• Ryanair (NASDAQ: RYAAY) was upgraded at Citigroup to Buy from Hold.
• Boardwalk Pipeline (NYSE: BWP) was raised to Buy from Hold at Deutsche Bank.
• Cowen lifted Biogen Idec (NASDAQ: BIIB) to Outperform from Neutral.
• JP Morgan upgraded Choice Hotels (NYSE: CHH) to Neutral from Underweight following the better-than-expected Q3 report.
• Oppenheimer upgraded shares of Integra LifeSciences (NASDAQ: IART) to Outperform from Perform on valuation, the company's minimal exposure to economic conditions, and expectations for margin improvement and a rebound in organic growth.

Analyst downgrades:

• Sherwin-Williams (NYSE: SHW) and AerCap Holdings (NYSE: AER) were downgraded to Neutral from Overweight at JP Morgan.
• UBS downgraded Embarq (NYSE: EQ) to Neutral from Buy following the CenturyTel (NYSE: CTL) merger announcement.

MAJOR PAPERS:

• According to people familiar with the situation, the Wall Street Journal reported that Yahoo! Inc (NASDAQ: YHOO) is again talking to Time Warner Inc (NYSE: TWX), this time about taking over AOL, with Time Warner taking a stake in the combined entity. News Corporation (NYSE: NWS) has its eye on any Yahoo moves. Meanwhile, Microsoft Corporation (NASDAQ: MSFT) is considering what its next move against Yahoo might be and is talking to News Corp.
• The Wall Street Journal also reported that, as part of the company's plan to cut costs, Tribune Co's Los Angeles Times newspaper may look to cut about 250 jobs, including about 17% of its news staff.
• The Financial Times reported that Chrysler, which has been searching for foreign partnerships, signed with China's Great Wall Motor a memorandum of understanding to explore long-term business ties in areas that include technology, distribution and components.

OTHER PAPERS:

• According to the Dallas News, AMR Corporation's (NYSE: AMR) American Airlines informed its flight attendants' union that is may lay off 900 flight attendants on August 31.

WEB SITES:

• Yonhap reported that LG Electronics will release "Dare," a new touch-screen mobile phone in the U.S. that will compete with Apple Inc's (NASDAQ: AAPL) latest iPhone models.

MAJOR PAPERS:

• According to internal company and agency documents, the Wall Street Journal reported that the FAA is investigating into why AMR Corporation's (NYSE: AMR) American Airlines ordered mechanics to skip specific safety instructions to detect damage to planes from potential lightning strikes.
• In order to compete more effectively against Apple Inc's (NASDAQ: AAPL) iPhone, the Wall Street Journal reported that Research in Motion Limited (NASDAQ: RIMM) is planning to introduce "Thunder," a touch-screen version of its BlackBerry device.

OTHER PAPERS:

• Yahoo! Inc (NASDAQ: YHOO) is trying to quickly put the finishing touches on a search advertising deal with Google Inc (NASDAQ: GOOG) as billionaire Carl Icahn launches a proxy fight for control of Yahoo's board, according to the New York Post. Yahoo! hopes to announce a deal with Google to create an open platform system within the next week, two inside sources said.
• The New York Post reported that a partnership of MGM Mirage (NYSE: MGM) and investment company Dubai World may seek to buy the Drake Hotel site from developer Harry Macklowe. If a deal is reached, MGM and Dubai World would assume $580M in defaulted debt and interest, inside sources said.

Delta Air (NYSE: DAL) is recently up $0.53 to $20.53. On November 14, Pardus Capital Management, an activist hedge fund, sent a letter to DAL recommending DAL merger with UAL Corp (NASDAQ: UAUA). WTI Crude oil is down 0.51% $93.61 according to Bloomberg. DAL December option implied volatility of 74 is above its 24-week average of 50 according to Track Data, suggesting larger price risk.

AMR (NYSE: AMR) is recently up $1.04 to $24.36. AMR the world's largest airline, has been frequently mentioned as a merger partner over the last seven months. AMR December option implied volatility of 62 is above its 26-week average of 52 according to Track Data, suggesting larger risk.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

Barron's piece on AMR Corporation's (NYSE: AMR) American Airlines points to how investor sentiment might be changing toward the airline industry. The airlines are profitable, have huge cash positions and little debt outside of the leases for their planes.

One potential catalyst could be the spinning off of many of the industry's frequent flyer programs, similar to what Air Canada did with its Aviation Holdings frequent flyer program.

Also, as American Airlines and UAL Corporation (NASDAQ: UAUA) are getting pitched by investment bankers about spinning off assets, the supply-and-demand balance for oil and jet fuel are looking more favorable for a price decline. With demand slowing and new supplies coming to market from Saudi Arabia, the drop in fuel could be considerable.

With American having corrected from $40 and now selling for $22, and UAL Corp holding up better, but still selling for a cheap valuation, both stocks seem to have a number of catalysts in place to drive both airline stocks higher.

AMR Corp. (NYSE: AMR), parent of American Airlines, was urged by one of its top shareholders to consider "all options to enhance shareholder value" such as spinning-off American's frequent flier program, according the ' DealBook blog.

In a letter to the Fort Worth-based company, FL Group of Iceland said "a conservative analysis" of AMR
shows "there is significant hidden shareholder value to be unlocked." In particular, FL Group believes that unbundling AMR's AAdvantage ("AAD") Frequent Flier program could increase shareholder value "by more than $4 billion."

The idea isn't without precedent. As DealBook notes UAL Corp (NYSE: UAUA), the parent of United Airlines, are expected to consider spin-offs at its annual meeting this week and that Air Canada has already spun off its frequent flier plan. Shares of AMR, which have plunged 50% since January, are trading slightly higher today. But investors who have watched airlines destroy billions of dollars in shareholder value over the years shouldn't get their hopes up.

Ceylon Securities analyst Ray Neidl told Bloomberg News that AMR sees "greater value in keeping all of the parts together."

Maybe AMR will change its tune if other shareholders join forces with FL Group.

MAJOR PAPERS:

• The Wall Street Journal's (subscription required) "Heard on the Street" column focused on Credit Suisse Group's (NYSE: CS) new CEO, Brady Dougan, saying the company chose him to hold a steady course, avoiding periods of high revenues followed by crashes.
  
• Barron's Online's (subscription required) "Weekday Trader" column wrote that Elizabeth Arden Inc (NASDAQ: RDEN) trades at a discount to its industry and the broader market, and looks enticing at current levels.

OTHER PAPERS:

• BusinessWeek's "Inside Wall Street" column reported that AMR Corporation (NYSE: AMR), the parent of American Airlines, is a buyout target of a group that includes the Goldman Sachs Group Inc (NYSE: GS).
• The New York Times reported that Congress has reintroduced legislation to allow the federal government to further regulate the tobacco industry by cracking down on marketing aimed at young people.
• The New York Times also reported that Microsoft Corporation's (NASDAQ: MSFT) CEO Steve Ballmer said Wall Street analysts are being too optimistic about sales of Windows Vista.
• According to the Red Herring, Google Inc (NASDAQ: GOOG) has acquired Adscape for $23 million.

MOST NOTEWORTHY: Select airline companies and Sanofi-Aventis (SNY) were the most notable upgrades this morning.

• Positive industry trends and relative valuations forced Calyon to upgrade AMR Corp (NYSE: AMR), Continental Airlines 'B' (NYSE: CAL), UAL Corp (NASDAQ: UAUA) and US Airways Group (NYSE: LCC) to Buy from Add.

• Merrill Lynch upgraded shares of Sanofi-Aventis ADS (NYSE: SNY) to Buy from Neutral this morning. The upgrade was based on expectations of positive news from the U.S. approval of Acomplia and a potential win in its Plavix patent litigation, among other reasons.

OTHER UPGRADES:

• Deutsche Bank upgraded shares of Ericsson (NASDAQ: ERIC) to Buy from Hold as they expect positive trends to emerge in 4Q and 1Q07, based on "benign" pricing in the industry and higher handset sales.

• Lehman upgraded shares of STMicroelectronics N.V. (NYSE: STM) to Overweight from Underweight; the firm expects a resolution to their NOR flash business shortly either by a spin-off or a sale.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).